Construction Industry Scheme (CIS)
is the UK’s tax deduction regime for construction: contractors deduct 20% (30% if unverified) from payments to subcontractors and pass it to HMRC as an advance on the subcontractor’s tax. Registration, verification and monthly returns are mandatory for businesses paying for construction work.
How CIS works in practice
The paying contractor verifies each subcontractor with HMRC, applies the dictated rate — 0% for gross-payment status, 20% standard, 30% unverified — deducts from the labour element of invoices, and files monthly CIS returns. Deductions credit against the subcontractor’s year-end tax.
CIS interacts with employment status: it applies to genuinely self-employed subcontractors, and using it does not immunise against employment-status challenges — a CIS-paid worker under direction can still be reclassified. Official guidance: gov.uk.
FAQ
Who counts as a contractor under CIS?
Construction businesses paying subcontractors, and non-construction businesses spending above HMRC’s threshold on construction. Property developers are contractors; ordinary property investors usually are not. International firms building in the UK fall in scope regardless of where they are established.
What is gross payment status?
Approval letting a subcontractor be paid without deduction, based on turnover, compliance and business tests. It improves cash flow materially and is prized — and lost quickly for late filings, so compliance calendars matter.